Sunday, February 15, 2009

Sunday Morning News

The allure of protectionist/nationalist trade policies in difficult time is quite understandable and difficult to resist. But understandable or not, they still reduce people's standard of living by reducing their economic options and in many cases forcing them to buy goods and services from low-efficiency and/or low-quality producers. This, added with 1) the moral problems inherent with telling people who they can and cannot do business with, 2) the enforcement costs required to ensure that all the populace's buying and selling is happening with only state-approved entities, and 3) the creations of black markets that are an inevitable response to (2) and (3), all conspire to make them a bad idea.

The G7's pledge this weekend is a step in the right direction ... or, at least, a pledge to not step too far in the wrong one.